Department of Water and Power City of Los Angeles Los Angeles 2 nd Regional Investors Conference February 26-27, 2014
Overview • Established more than 100 years ago and is the largest municipal utility in the United States • Revenue-producing proprietary department of the City of Los Angeles that provides electric and water services to the second most populous city in the U.S. (Serving 3.8 million population) • Power and Water Systems are separate and distinct and its operations are financed exclusively from sale of water and power, with no tax support • Operating Revenues for FY2013: - Power System: $3.16 billion - Water System: $1.04 billion • Significant capital funding raised through bond issuances Standard & Fitch Ratings by: Moody's Poors Ratings Power System Aa3 AA ‐ AA ‐ Water System Aa2 AA AA 1
Governance and New General Manager • General Manager Governance - Administers the affairs and operations of the Department - Marcie Edwards appointed as new GM Mayor City Council • Energy and Environment Committee - This City Council Committee has jurisdiction of matter concerning the Department Energy & • City Council Environment Committee - Approves rates requests and selection of Board of Water & Power Commissioners and General Manager • Board of Water and Power Commissioners Board of Water and Office of -The five-member Board establishes policy for Power Commissioners Public the Department and are appointed by the Accountability Mayor and confirmed by the City Council for five-year terms Marcie L. Edwards • Office of Public Accountability General Manager - Executive Director is appointed by a citizens committee, subject to confirmation by the City Council and Mayor - Provides public, independent analysis to the Board and City Council 2
LADWP’s Transformation 1. Power Supply Replacement Program Next 2. Power Reliability Program Century Power 3. Customer Opportunities Program Next 1. Safe Drinking Water Program Century 2. Water Infrastructure Program Water 3. Local Water Supply and Remediation 4. Regulatory Compliance - Owens Valley Improve Customer Service Keep Rates Competitive Increase Efficiency Bold text: mandated program 3
LADWP’s Growing Capital Program is Focused on Meeting Regulatory Mandates and Addressing Aging Infrastructure Power Mandates Water Mandates • State-Mandated Green House Gas Reduction (AB 32) • Cover all Remaining Open Reservoirs (Long Term 2 Enhanced Surface Water Treatment Rule) • Eliminate Once-Through-Cooling of all Coastal Power Plants (Clean Water Act – 316b) • Convert Chlorine to Chloramines (Stage 2 Disinfectants and Disinfection Byproducts Rule) • Transition out of Coal Resources (SB 1368) • Owens Valley Management (Clean Air Act) • Increase Renewable Resources: 20% - 2011-2013; 25% end of 2016; & 33% by end of 2020 (SB 2(1X)) $8 $6 $7.4 2008-2012 $4 2013-2017 $2 $3.9 $4.2 $1.9 $0 Power Water Comparable 5-Year Capital 4 Spending in Billions
LADWP’s Ongoing Power Supply Transformation LADWP’s evolution will eliminate coal power production, increase renewable energy to at least 33%, and drive energy efficiency to at least 10% of power supplies. Power supplied by natural gas will play an increased role, and help balance intermittent resources . 2010* 2026 2002* Renewable Generic 3% Power 5% Renewable Energy Hydro 20% Efficiency Hydro 10% 13% Natural 3% Gas Natural Nuclear 24% Gas 13% Natural Nuclear 22% Gas 11% 43% Renewable 33% Coal Coal 50% 39% Hydro Nuclear 4% 8% Wind Turbines at Pine Tree Wind Farm Project *Note: percentages based on energy sales Source: 2013 Adelanto Solar Power Project Power IRP Profile and Outlook 5
Power System Summary of Five-Y ear Capital Plan ($ in millons) Summary of Capital Program For FY2014-18 $8,221 $1,782 Power Supply Replacement: $1,664 $1,642 1,800 $ 1,559 $1,574 Integrated Resource Plan (IRP) $941 11% Renewable Portfolio Standard (RPS) 2,019 25% 522 1,200 1,283 1,035 Customer Opportunity: Energy Efficiency 834 10% 1,176 1,027 Power Reliability Program (PRP) 2,446 30% 600 Other Infrastructure Improvements 1,540 19% 1,036 631 545 499 Integrated Support and Other Joint Services 441 5% 467 - Total Power System Capital Plan $8,221 100% 2014 2015 2016 2017 2018 Internally Generated Funds External/Debt Financing 6
Power System Financial Performance Revenues, Expenses, and Debt Service Coverage ($000) Fiscal Year Ended June 30, 2013 2012 2011 2010 2009 Operating Revenues $3,162,502 $3,081,680 $3,125,957 $3,235,193 $2,755,935 Operating Expenses 2,266,249 2,235,522 2,308,188 2,287,434 2,043,192 Operating Income $896,253 $846,158 $817,769 $947,759 $712,743 Other Income, AFUDC, Contributions 180,084 185,999 162,521 152,168 168,220 Change in Fund Net Assets $1,076,337 $1,032,157 $980,290 $1,099,927 $880,963 Total Debt Service $426,825 $343,093 $400,846 $309,349 $270,357 Debt Service Coverage Ratio 2.52x 3.01x 2.45x 3.56x 3.26x Transfers to City $246,534 $250,077 $258,815 $220,475 $222,506 Unrestricted Cash 597,525 $417,895 $561,414 $423,855 $444,676 Debt Reduction Trust Fund 490,325 490,444 485,609 529,338 547,282 Total Cash Balance $1,087,850 $908,339 $1,047,023 $953,193 $991,958 Days Cash on Hand 175 148 166 152 177 Debt to Capitalization Ratio 60% 57% 57% 55% 55% Source: Audited Financial Statements 7
Power System Debt Overview Debt Profile as of December 31, 2013 millions 500 Fixed Rate Commercial Note 450 Paper 4% 3% 400 350 VRDOs 300 13% 250 200 150 Fixed Rate 80% 100 50 0 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 Total Debt Outstanding $7.26 billion Fiscal Year Principal Interest Debt Characteristics • No derivative products 8 • Extended SBPA’s & Staggered expiration dates
Water System Sierra Nevada Mountains Delta Los Angeles Aqueduct Colorado River Aqueduct State Water Project Local Groundwater, The Los Angeles Aqueduct Water Recycling, and Conservation 9 9 9
E ffect of Conservation Water Use and Population CITY OF LOS ANGELES WATER USE AND POPULATION 1,000 Population Water Demand 900 4 3.89 800 700 3 2.83 599 Population in Millions 600 Thousand Acre-Feet 568 500 2 400 300 1 200 100 0 0 Fiscal Year Ending June 30 Note: - Population was updated with 2010 US Census data. 10
A Diversified Water Supply is a Priority for the Department FY 2009 ‐ 2013 FY 2034 ‐ 35 Forecast (Average Total: 559,276 AFY) (Projected Total: 710,800 AFY Normal Year) Local Recycled, GW, 7,255, 1% 61,252, 11% MWD, LA 291,572, Aqueduct, 52% 199,196, 36% Consideration of accelerated plans to achieve these goals is also underway 11
Water System Five-Year Capital Improvements Plan Summary of Capital Program ($ millions) $801 100% $815 $835 $679 $847 411 486 639 695 660 50% 404 193 162 175 152 0% FY14 FY15 FY16 FY17 FY18 Externally Financed Internally Financed $675 $1,454 $1,848 12
Water System Financial Performance Revenues, Expenses, and Debt Service Coverage ($000) Fiscal Year Ended June 30, 2013 2012 2011 2010 2009 Operating Revenues $1,042,228 $811,897 $756,605 $812,360 $783,964 Operating Expenses Excluding 672,462 544,824 540,041 584,382 581,587 Depreciation Operating Income before Depreciation $369,766 $267,073 $216,564 $227,978 $202,377 Other Income, AFUDC, Contributions 49,482 64,012 75,165 45,841 41,204 Change in Fund Net Assets $419,248 $331,085 $291,729 $273,819 $243,581 Total Debt Service on Bonds $192,885 $178,468 $167,371 $134,106 $116,026 Debt Service Coverage Ratio 2.17x 1.86x 1.74x 2.04x 2.10x Unrestricted Cash Balance $415,786 $296,725 $207,631 $170,685 $120,375 Water Expense Stabilization Fund 33,159 33,078 32,915 32,680 32,678 Total Cash Balance $448,945 $329,803 $240,546 $203,365 $153,053 Days Cash on Hand 244 221 163 127 96 Debt to Capitalization Ratio 58% 57% 58% 54% 50% Source: Audited Financial Statements 13
Water System Debt Overview Debt Profile as of December 31, 2013 millions 260 Debt Characteristics 240 220 • No interest rate swaps 200 180 • No auction rate or insured floaters 160 140 • ~92% fixed/ ~8% variable mix 120 100 • Extended SBPA’s and staggered 80 expiration dates 60 40 • Strong VRDO performance 20 - 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 Principal Interest Fiscal Year Total Debt Outstanding = $3,887 million 14 (including $228.2 million State Loans)
The Water System is Well Positioned Going Forward • Large and Diverse Service Area – Serves population of 3.8 million – California’s largest retail water supplier – 71% residential / 29% commercial/other • Diversified Water Resources – Diverse sources of water including Los Angeles Aqueduct that provides ~36% of total water supply • Strong Historical Financial Performance – Conservative debt profile – Strong financial metrics • Competitive Rates – Department’s rates are competitive – Demonstrated ability to raise rates to meet adopted goals 15
Current Updates City of Los Angeles Downtown 16 16
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